FLASHNEWS:

PACRA Upgrades Entity Ratings of ACT2 Din Wind (Private) Limited

Lahore, January 18, 2023 (PPI-OT):Act group and Din group have successfully set up wind power plant – Act2 Din Wind (Pvt.) Limited (“Act2 Din Wind or the Project”), formerly known as Act2 wind energy Pvt. Ltd. Hydro China International Engineering Company Limited and Hangzhou Huachen Electric Power Control Company are the EPC contractors. The Upgrade in ratings incorporates commissioning of the complex by declaring commercial operations on February 2022, after taking into account all the pre-requisites mentioned in the EPA, as a result, the project does not feature any construction risk. Further, as of 1QFY23 Act2 Din Wind has paid off first three installments of project-related loan in timely manner.

The construction contractors are the O and M operator for two years after COD; and provide the warranty bond (10% of EPC cost) in the form of irrevocable bank guarantee for 24 months after COD. Act2 Din Wind is awarded a cost-plus tariff, with the payments to be received from CPPA-G backed by the sovereign guarantee. Energy Purchase Agreement (“EPA”) is signed with CPPA-G, as per the EPA, in case of non-project missed volumes the power purchaser shall be liable to pay the missed volumes calculated using tariff rates. During the period, FY22, Act2 Din wind recorded sales revenue of PKR ~599mln along with a Net Profit of PKR ~299mln respectively, being the first 5 months of its operations.

Working capital requirements of Act Wind are fulfilled through in-house adequate cash flow generation, without any utilization of short term borrowing lines. Free cash flows of the Company are in a comfortable position to make timely debt repayments. The Project will maintain the Debt Service Reserve Account (DSRA), which will be backed by 6 months SBLCs, in total providing coverage of six months on its financial obligations till maturity.

The leveraging of Act2 Din Wind is yet sizeable and will gradually decline along with the life of the project as the repayment of project-related loan has started. The project revenues and cash flows are exposed to wind risk, there is seasonal variation in the wind speed which affect the electricity generation, and ultimately cash flows may face seasonality. However, historical wind speeds provide comfort that ACT2 Din Wind would be able to generate enough cash flows to keep its financial risk manageable.

Comfort is drawn from the group association, having strong financial backing and relevant experience. Management has put forth the requisition for true up tariff to NEPRA, final decision in this respect is awaited. Upgrading operational performance in line with agreed performance levels is important. Sound cash flow generation remained congenial for the ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com